Besides an IPO, there isn’t any other choice one can make in business that – if the circumstances are right – guarantee the overnight creation of new millionaires, sometimes even billionaires. An IPO (initial public offering) is when a company goes public for the very first time and begins to sell their shares on the open market. An IPO is actually one of very few times that a company will sell their shares themselves; after the shares are initially issued they are traded amongst investors on a secondary market – which is what we refer to as the stock exchange. The purpose of an IPO is to raise capital for the firm issuing shares. They give out shares – a percentage of ownership in the company – in exchange for money.
The amount of money that any given firm can bring in during their IPO is dependent on what the market believes the total value of the company is. In an IPO, everyone who already owns shares in the company tends to get very, very rich. When Facebook went public, it created hundreds of millionaires and even some billionaires. Yes, we all know Mark Zuckerberg became a billionaire several times over, but even people who were loosely connected to the company made bank. David Choe, an artist who had done a mural for the company’s first office and been paid in company stock instead of cash (because Facebook didn’t have any then) woke up the morning of the IPO to find that his shares were now worth around $200 million, making him the richest visual artist in the world. Not a bad return for a painting.
The point here is that IPOs are where investment banks make their bread and butter, and big, blockbuster IPOs are what the financial world lives for. There have been a few notable ones recently, so to find out where they rank let’s examine the 10 biggest IPOs of all time.
10 #10 Telstra - $5.6 Billion
Telstra is Australia’s largest telecommunications company with revenues regularly in the billions. As you can imagine, being the market leader in telecommunications – a hyper-profitable industry – in a developed country like Australia made its IPO very attractive to investors. The Australian government originally owned Telstra, but its initial 1997 IPO was step 1 in the eventual complete privatization of the company. The IPO raised $5.6 billion, and a large portion of the stock, roughly 17%, was kept by the Australian government and placed into a pension fund for public servants. In August 2011, the fund sold off the last of Telstra’s shares, completing the privatization of Australia’s largest telecommunications provider.
9 #9 France Telecom - $7.3 Billion
France Telecom – now known as Orange S.A. – was, much like Telstra, the largest telecommunications company in its domestic market, which in this case was France. In 1997 the French government decided that it wanted a piece of that sweet, sweet IPO money, and to that end decided to take the corporation public. The IPO raised $7.3 billion in capital, which the company would later use to finance acquisitions of English telecommunications provider Orange. The purchase of Orange would put the company through rough times, as the merger would prove to be an awkward and costly affair. In 2004 the French government sold their last stake in France Telecom, and then in 2013 the company re-branded itself simply as Orange, dropping the France Telecom name permanently.
8 #8 Kraft Foods - $8.7 Billion
The company behind Kraft dinner has a lot more on its plate than just cheesy noodles. In 2001 Phillip Morris, a company best known for producing cigarettes, owned Kraft along with other brands in its food portfolio. They sold off portions of the company to the public but retained an 81% controlling share in the firm until 2007, when – under their new name Altria – sold off the remaining shares. The 2001 IPO still brought in $8.7 billion for Kraft, which is big bank for a company that first made its fortune manufacturing artificial cheese products.
7 #7 AT&T Wireless - $10.6 Billion
AT&T may be universally disliked by its clients, but to be fair pretty much every telecommunications company is hated in one form or another. In 2000 they decided to go public with their wireless subsidiary, AT&T Wireless, right in the height of the dotcom boom. They raised $10.6 billion that day, but despite having a $70 billion valuation and being the 2nd biggest wireless provider, the company was bought out by competitor Cingular in 2004. They were reunited with their parent company in 2005 and now operate simply under AT&T.
6 #6 Deutsche Telekom - $13 Billion
The name Deutsche Telekom may be unfamiliar to North American readers, but they’re almost certainly familiar with the Americanized name of their company, T-Mobile. In 1996, Deutsche Telekom was the 3rd biggest telecommunications operator in the world. They brought the company public and succeeded in raising $13 billion during their IPO, but the stock price soon took a dip straight after being issued. Investors at the time were concerned with their heavy debt load, but the company soon carried on. Today, public investors own 68% of the company and the other 32% of ownership is retained by the state of Germany.
5 #5 GM - $15.8 Billion
General Motors (commonly known as GM) is a multinational auto manufacturer that’s based out of Detroit, the USA’s traditional hub of the auto industry. In 2008, during the 100th anniversary of the company, it was rocked by the ongoing global financial crisis. The United States federal government, who intervened with a $50 billion bailout, saved the corporation. Incredibly, they returned to profitability only a year and a half later with an IPO that allowed them to raise $15.8 billion in capital – one of the quickest and most successful corporate comebacks in history.
4 #4 Facebook - $16 Billion
The hype surrounding Facebook was palpable in the months leading up to its now infamous IPO. It seemed that every investor, professional and hobbyist, was looking to get a piece of the action. The technical problems that accompanied its opening day in 2012 are now legendary – computer glitches that delayed trading by up to 30 minutes and a general sense of overvaluation sent the stock price tumbling right out of the gate. Mark Zuckerberg would soon right the course of the ship, bringing the stock of the price up 52% from its IPO price within 2 years and restructuring Facebook’s operations. Despite the technical glitches, the $16 Billion Facebook pulled in would go on to help it finance its acquisitions of WhatsApp and Oculus.
3 #3 Enel S.p.A - $16.5 Billion
Enel is an Italian electric utility company, one of the biggest in Europe and the world. Enel decided to set up an IPO after they realized they were deeply indebted and that the stock market in the late 90s prior to the dotcom boom was roaring. They took advantage of the timing and managed to raise an impressive $16.5 billion on the NYSE through their IPO. Despite the initial success, Enel never had much room for growth. Investors were increasingly unimpressed with the firm, and in 2007 they delisted from the NYSE for good.
2 #2 Visa - $17.9 Billion
The fall of 2008 was an awful, awful time to be in the finance industry. The general sense of doom and gloom had seeped over from the financial world into the real world, and investors and everyday people alike were concerned for the future. Very few companies could prepare an IPO in that atmosphere and still emerge successful. Fortunately, Visa was a company and a brand name that could. At the time of their IPO in late 2008, Visa was – well, Visa. Everyone knew who they were, and 1.5 billion of their credit cards were in circulation all over the world. It was a no brainer for investors, and they were right; Visa stock posted a return of 219% after the first year.
1 #1 Alibaba - $25 Billion
The biggest IPO of all time – and in truth the company that inspired this piece – happened within the last month. If you missed it, here’s a quick recap: Alibaba is the Chinese equivalent of eBay, Amazon, and Paypal all rolled into one. Okay, maybe not quite, but there’s no denying that Alibaba has a stranglehold on e-commerce in its native China. When founder Jack Ma failed to come to an agreement with the Hong Kong stock exchange, he took the company’s IPO over to New York. In late September of this year Alibaba officially became the biggest IPO of all time, raising $25 billion in one day. Investors remain extremely bullish about Alibaba, and with good reason; it’s the market leader in the world’s most populous and fastest growing country - and thanks to this IPO, Jack Ma is now the richest man in China.